In accounting practices, vendor-specific objective evidence (VSOE) is a method of revenue recognition allowed by US GAAP that enables companies to recognize revenue on specific items on a multi-item sale based on evidence specific to a company that the product has been delivered.
GAAP rules and pronouncements come from the Financial Accounting Standards Board (FASB) which is a non-profit organization that the Securities and Exchange Commission (SEC) has created to promulgate and to amend the rules of GAAP reporting as required.
Therefore, a company selling software with a package including installation and a one-year maintenance contract can only record the sale on a deferred basis and earnings are recognized over the term of the maintenance contract.
[4] VSOE revenue recognition is commonly used by companies that sell software products and services in multiple-element bundles.
The VSOE feature is intended for use by United States companies to maintain GAAP compliance with the American Institute of Certified Public Accountants (AICPA) Statement of Position 97-2 (SOP 97-2) and SOP 98-9 (the residual method).